BofA Executive Says 10x More Ship Traffic Needed to Normalize Oil Prices

Oil prices will not return to normal levels unless ship traffic through the Strait of Hormuz increases roughly 10 times ^[1].

This projection highlights a critical vulnerability in the global energy supply chain. Because the Strait of Hormuz is the primary artery for Persian Gulf oil, any sustained restriction on vessel movement creates a supply bottleneck that drives up costs for consumers worldwide.

Francisco Blanch, the head of commodities and derivatives at Bank of America, said the dramatic increase in traffic is necessary to stabilize the market. "We need to see about ten times more ships moving through the Strait of Hormuz to get oil prices back to normal," Blanch said ^[1].

The Strait of Hormuz is a narrow waterway located between Oman and Iran. Current disruptions have significantly impacted the volume of tankers able to transit the region. According to Jason Karaian of The New York Times, ship traffic through the Strait has fallen by roughly 50% since the conflict began ^[2].

Blanch said that the market will continue to price in risk as long as the flow remains restricted. "Unless the flow through Hormuz ramps up dramatically, the market will continue to price in risk and keep oil elevated," Blanch said ^[3].

While some market reports suggest that oil prices are influenced by the uncertainty surrounding a potential U.S.-Iran deal, the Bank of America analysis focuses on the physical volume of shipping. The reduction in vessel traffic has tightened the global oil supply, a primary factor keeping prices high [1, 2].

Industry observers note that the current volatility is a direct result of these logistical constraints. Until the bottleneck is relieved, the risk premium associated with the waterway will likely remain a permanent fixture in global energy pricing.